One difference between an NPV break-even level of sales and an accounting break-even level of sales is the:
A) consideration of the opportunity cost of capital.
B) consideration of interest expense.
C) allowance of the sales level to vary in response to changes in demand.
D) inclusion of income taxes.

Question

Quizplus · Accepted Answer

The NPV break-even level of sales considers the opportunity cost of capital, which is the cost of investing money elsewhere. This means that the calculation takes into account the fact that investing in a project ties up capital that could be used elsewhere, and therefore the minimum sales required to justify the investment will be higher than the accounting break-even level of sales. Interest expense, varying sales levels, and income taxes may be considered in both methods of break-even analysis.

One Difference Between an NPV Break-Even Level of Sales and an Accounting